On 1 January 2014, an amendment to SOLAS
Chapter VI on the Carriage of Cargoes and Oil Fuels came into force, prohibiting
the blending of bulk liquid cargoes and production processes on board ships during
the sea voyage. As SOLAS does not define the meaning of ‘sea voyage’, this
ambiguity has led to a number of questions from members about these amendments
to Chapter VI and regarding blending/commingling generally.
Definitions
Blending is defined by SOLAS as follows:
‘Physical blending refers to the process whereby
the ship’s cargo pumps and pipelines are used to internally circulate two or
more different cargoes with the intent to achieve a cargo with a new product
designation.’
Commingling on the other hand means the
operation of loading in the same cargo space on board a ship parcels of the
same product/bulk cargo (usually liquid) with the same specification from different
sources such as different shippers or ports, but without taking any other steps
in relation to the product/bulk cargo other than to carry and discharge and
deliver it.
Loading of the same product with the same
specification from different shore tanks, barges or trucks, etc. from the same
port or the same single terminal does not constitute commingling (or blending).
The ‘same product’ does not mean identical
products as it is appreciated that chemical composition, including water, cat
fines, etc. might vary slightly. However, the product variation must fall within
acceptable limits for the cargo to retain the same cargo categorization.
Cargo operations in practice
Blending and commingling constitute intentional
contamination of one cargo with another; so charterers/shippers/receivers
should bear the risk of the cargo not being mixed to form a homogenous product.
The master should be given specific instructions
prior to loading to assess whether the multiple grades can be safely loaded in
the specific cargo tanks without any risk of tank overflow or pollution. It is
also recommended, if possible, to get the chemical analysis of the final
product done prior to loading
to check on the physical and chemical characteristics
of the cargo, especially the pour point, cloud point and if there is going to
be any wax formation which might lead to excessive cargo remaining on board on
discharge.
When agreeing to blending or commingling
cargoes, the master should also consider the overall effect on the ship’s
stability. The blended density will be different to that of the originally
loaded cargo and this may have a direct effect on the ship physically,
including trim and draught.
Also, when blending or commingling crude
oil cargoes, significant wax drop-out can occur, which will result in
difficulties in discharging and significant cleaning costs.
Bills of lading and LOIs
It is important that the exact cargo description
and the exact operation are clearly defined in the bill of lading to avoid
falling foul of the provisions to the cargo rules regarding description. The
bill should show:
·
quantity;
·
cargo
type;
·
loading
port; and
·
date
for all the blended or commingled cargoes.
Where bills of lading have already been
issued for part of the cargo on board, the master should ensure that these are surrendered
and cancelled before any new bills, which cover the final product, are issued.
Where commingling (or blending) is
requested by cargo interests, it is recommended that a letter of indemnity is
sought.
Of course, an indemnity is only as good as the
creditworthiness of the party granting it, so before going ahead, members
should ensure that they are fully satisfied with the financial standing of the
indemnifiers.
An LOI is not enforceable if the underlying
transaction is intended to defraud a third party, for example, where it is
received in return for misdescribed cargo.
Club cover - Commingling
Claims arising out of commingling are
generally accepted as poolable. In so far as a cargo claim does arise, it is
essential for poolable cover that the bill of lading properly reflects the
cargo on board as set out above.
Failing which, members will fall foul of
provisos (7) and (8) to the cargo rules regarding description.
Provided the bills of lading properly reflect
the cargo on board, P&I cover will be operative in the usual way.
Club cover - Blending
In relation to blending operations, there is
currently no express exclusion in the
Pooling Agreement. However, given the
specialist nature of the blending operation, which is comparable to using the
ship as a floating chemical laboratory, to the extent that liability arising
from a blending operation could
be considered imprudent, unsafe, unduly
hazardous or improper, this may trigger the hazardous trade exclusion, which
would render any claim discretionary
under rule 4.8.
In reviewing such a claim, the board will
take into consideration whether the recent changes to SOLAS Chapter VI have
been complied with. The same provisos with respect to issuing bills of lading
would also apply.
SOLAS
1 January 2014 saw the entry into force of
a number of amendments to SOLAS. Amongst these, the changes to SOLAS Chapter VI – Carriage of Cargoes,
Regulation 5.2, have a particular
significance for the conduct of cargo operations on board tankers.
Regulation 5.2 now prohibits the practice
of physical blending of bulk liquid cargoes during sea voyages.
For the purpose of the SOLAS amendments,
physical blending operations have been defined as:
‘the process whereby the ship’s cargo pumps
and pipelines are used to internally circulate two or more different cargoes
with the intent to achieve a
cargo with a new product designation’.
The regulation goes on to state that: ‘any production process on board a ship
during sea voyages is prohibited’.
It should be noted, however, that this
regulation:
‘does not preclude the master from undertaking
cargo transfers for the safety of the ship or protection of the marine
environment’.
The regulations do not apply where cargo is
recirculated within its cargo tank or through an external heat exchanger during
the voyage for the purpose of maintaining cargo homogeneity or temperature control,
including when two or
more different products have previously
been loaded into the same cargo tank within port limits.
Likewise, where a cargo becomes homogeneously
mixed simply by discharging it ashore alongside a terminal using the ship’s
pumps, this will not fall foul of the new SOLAS regulations. The same would be
true where the operation takes place by STS operations either within port limits
or STS operations at sea.
If the ship alone was blending cargo on
board by recirculation between tanks during a sea voyage, this would clearly be
in breach of the new regulations.
The same would arguably be true if the ship
was blending at a designated site offshore. We say ‘arguably’ because SOLAS
does not define the meaning of ‘sea voyage’ and this ambiguity has led to a
number of questions from members. That said, although SOLAS does not define the
meaning of ‘sea voyage’, the intention of the regulation would appear to prohibit
the physical blending of bulk liquid cargoes using the ship’s cargo pumps and
pipelines outside port limits, whether at anchor or not.
If a member intends to undertake physical
blending operations within port limits, whether at anchor or moored, authorization
should first be sought from the local port state administration in order to
ensure that the local interpretations of Regulation 5.2 are understood and
complied with.
Whether blending is permitted if a ship is
at anchor outside port limits is still open for discussion and will depend upon
the flag state and local authority’s interpretation of ‘sea voyage’.
Conclusion
Each instance of commingling and blending
will need to be considered on its own facts so that the club can determine
whether there are any cover issues which might arise from the cargo operation in
question. The above is therefore only for general guidance, and members and
brokers should speak to their usual club contact should they have any
questions.
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